Results for the Six Months Ended September 30, …...Review of Six Months Ended September 30, 2013 (1) 4 Net Sales 0.0 10.0 20.0 30.0 40.0 50.0 60.0 (Billions of yen) 14.5 8.0 19.7

Results for the Six Months Ended September 30, 2013

Management Overview

November 1, 2013

Copyright © 2013 IHI Corporation All Rights Reserved.

Tamotsu Saito, President and Chief Executive Officer

Contents


1. Management Overview.............................................................. 3

Review of Six Months Ended September 30, 2013............................... 4

Numerical Targets for Group Management Policies 2013..................... 6

Current Management Issues................................................................ 10

2. Progress of Group Management Policies 2013........................ 11

Strengthening of Common Group Functions toward Growth

(The Three Tsunagu)........................................................................... 12

Progress of Large-Scale Overseas Projects......................................... 15

Resources, Energy and Environment................................................... 18

Social Infrastructure and Offshore Facilities......................................... 19

Industrial Systems and General-Purpose Machinery............................ 20

Aero Engine, Space and Defense......................................................... 21


Management Overview

3

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

564.9 550.0 546.3

1,256.0 1,310.0 1,310.0

FY12

1H

Forecast

as of

May

FY13

1H

results

FY12

Forecast

as of

May

FY13

current

forecast

(Billions

of yen)


Review of Six Months Ended September 30, 2013 (1)

4

Net Sales

0.0

10.0

20.0

30.0

40.0

50.0

60.0

(Billions

of yen)

14.5

8.0

19.7

42.1

48.0 50.0

FY12

1H Forecast

as of

May

FY13

1H

results

FY12

Forecast

as of

May

FY13

current

forecast

Operating Income

Group Management Policies 2013 Start Smoothly In first half, slightly lower-than-planned net sales and higher-than-planned operating income and operating

margin posted

For full-year earnings forecasts, with exchange rate assumption (¥95/$) unchanged, net sales forecast left as

they stand, and operating income forecast slightly increased

* Figures for FY12 1H include the results of former Ships & Offshore segment (net sales ¥74.3 billion, operating income ¥4.1 billion).

* Figures for FY12 include the results of former Ships & Offshore segment (net sales ¥117.3 billion, operating income ¥6.5 billion).

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

(Billions of yen)

19.7


Review of Six Months Ended September 30, 2013 (2)

5

8.0

Change in net sales (Including change

in composition)

+1.7

Change in foreign exchange rate

+2.0

Change in construction project profitability

+4.0

Change in SG&A

+4.0

Forecast

as of

May

FY13

1H

results

Analysis of change in operating income in the six months ended September 30, 2013

(compared to forecast as of May 2013 forecast)

Causes of change in performance

Causes of substantial change for the better

in first half

Reduction of cost for civil aero engines

Correction of the strong yen

Events expected for second half

Uncertainty of offshore structures order receiving timing

Impact of unprofitable bridge construction work in Japan

Uncertainty about nuclear power business

Change for the better

Difference of event

occurrence time from

expectation

Net Sales Operating Income

FY2013 (Outlook) FY2015 (Target) FY2013 (Outlook) FY2015 (Target)

As of May Current Initially

<Ref>

Change in

exchange

rate

assumption

As of May Current Initially

<Ref>

Change in

exchange

rate

assumption

Resources, Energy

and Environment 350.0 350.0 440.0 450.0 14.0 14.0 21.0 25.0

Social Infrastructure

and Offshore Facilities 170.0 170.0 160.0 170.0 7.0 5.0 10.0 13.0

Industrial Systems and

General-Purpose Machinery 400.0 400.0 430.0 440.0 14.0 14.0 23.0 24.0

Aero Engine, Space

and Defense 380.0 380.0 380.0 400.0 20.0 25.0 19.0 26.0

Others 60.0 60.0 60.0 60.0 1.0 1.0 1.0 1.0

Adjustment amount -50.0 -50.0 -70.0 -70.0 -8.0 -9.0 -4.0 -4.0

Total 1,310.0 1,310.0 1,400.0 1,450.0 48.0 50.0 70.0 85.0

Exchange rate ¥95/US$ ¥95/US$ ¥80/US$ ¥95/US$ ¥95/US$ ¥95/US$ ¥80/US$ ¥95/US$


Numerical Targets for Group Management Policies

2013 (Net Sales, Operating Income)

6

(Unit: Billions of yen)


2013 (1)

7

Growth Factors in Resources, Energy and Environment, and Social Infrastructure and Offshore

Facilities (Liquefied Natural Gas-Related)

Burgeoning Natural Gas Demand and Increasing Scale of Liquefaction Plants

IHI Predominance in Natural Gas-Related Businesses

Plants that use natural gas,

and liquefaction plants

・Extensive track record in FS

and FEED projects

F-LNG facilities, offshore

vessels, and SPB tanks for use

on LNG carriers

・Shake-resistant square tanks

・High hull-space utilization

efficiency

Bases/storage tanks to receive

LNG

・Has leading position in Japan

and extensive track record in EPC

projects overseas

Natural gas power generation

facilities

・High efficiency and low

environmental impact

・Large number already delivered

Purification/Liquefaction Transportation/Storage Energy Conversion

Against backdrop of

climate change issues,

demand will increase for

natural gas, which emits

less CO2 per unit energy

consumption.

Demand will increase for

natural gas chemical plants

in U.S. due to shale gas

revolution, as well as for

plants for liquefied gas for

export and ships to carry

the products.

Globally develop products that link from the upstream to the downstream of LNG value chain


U.S. Natural Gas Consumption Forecasts (Source: U.S. EIA)

Increase in World’s Natural Gas Liquefaction Plant Capacity (Source: IEA)

[ ｔcf]

[bcm

]

Copyright © 2013 IHI Corporation All Rights Reserved. 8

Global Turbocharger Market

IHI’s Predominance in Competitive Turbocharger Relationships

Growth Factors in Industrial Systems and General-Purpose Machinery

Global Turbocharger Demand

From 22 million in 2011

to 35 million in 2015

IHIMHI

HW

BW

IHI

MHI

HW

BW

Others

In Japan Global Others

Others

IHI

Honeywell

Borg Warner

IHI

Mitsubishi Heavy

Industries

Honeywell

Borg Warner

Globally in third position in the industry

with market share of nearly 30%, IHI

accounts for nearly 60% of Japanese

market.

Demand for turbochargers for diesel engines will

globally increase in years to come due to expanding

and more stringent environmental regulations

passing from developed to emerging countries.

Downsizing of gasoline-engine turbocharging making

rapid progress due to tighter fuel consumption

regulations in some countries; jump in turbocharger

installation ratio that started in Europe will be seen in

China and North America.

(Sales basis)


2013 (2)

Mitsubishi Heavy

Industries

9

Firm Demand for Civil Aero Engines in which IHI Participates

Aviation Industry Growth

Growth Factors in Aero Engine, Space and Defense

World air passenger traffic to grow by an

average 4.8% over next 20 years

18,590 jet aircraft currently in service, but this

set to increase 1.8 times to more than 34,000

aircraft over next 20 years

2012 2032

14000

10000

5000

1992

0

World Air Passenger Forecasts (Source: JADC)


(As of March 31, 2013)


2013 (3)

Planned New Engine Shipments

(Units)

IHI’s

participa-

tion

Grand total

shipping

units

Order

backlog

Devel-

opment

Initial stage

production

Full-scale

production

increase

Expansion of parts

and maintenance

service

Development/Shipment Status of Engine Programs in which IHI Participates

Production of numerous best-seller engines,

from small- to large-size powerplants

Revenue passenger

km (1 bill passenger

km)

Actual Forecast

2012 (share)

Others

(incl. CIS)

Asia/Oceania

Europe

North America

2032 (share)

Global total

Average growth rate p.a. (%)

North America

Europe

Asia/Oceania

Others (incl. CIS)

Global total

Develop new markets for vehicular

turbochargers

Gain more orders for natural gas-related

business (F-LNG, tanks for LNG carriers,

chemical plants, etc.)

Expand heat/surface treatment business

Expand marine resource development

business in Brazil

Individual Policies

Current Management Issues

10 Copyright © 2013 IHI Corporation All Rights Reserved.

Imperative to Gain More Orders through Globalization

Changes in Management Environment in Recent Years

◇Market Globalization Development Importance of emerging countries as volume zone → Unavoidable globalization

Industrial advances/buildup in emerging countries → Importance of emerging countries,

and rise of emerging country companies

Global trend of trade liberalization → Activation of moves of management resources

that transcend national borders

Realize “The Three Tsunagu” through Matrix

Management Introduction

Link among businesses

Solution & Engineering Headquarters

Link products and services with ICT

Intelligent Information Management

Headquarters

Link global markets with IHI Group

Global Marketing Headquarters

Group Common Policies


Progress of Group Management Policies 2013

11

Multiple SBU Models Efforts to amalgamate multiple SBU products and services. Can be expected

to build on single SBU sales

Resource Provision Model Extracts factors that single SBUs cannot handle on a priority basis due to

deficiencies of resource such as personnel. Makes up for opportunities

missed in winning orders by having these addressed by our headquarters

Package Model Proposes packaging not only IHI Group products and services but also those

of other companies in a business entity. To be proposed/advanced as “All

Japan Projects” for Japan’s yen-credit projects

* SBU: Abbreviation for Strategic Business Model.

Establish target projects, and create new projects

Effort Patterns by Model (Exemplification)


Solution & Engineering Headquarters

Role

Develop solutions business (system sales) to create customer value, create business opportunities by expanding

business scope

Final vision

Expand business scope into upstream/downstream/peripheral areas

Build management structure toward amalgamation of products from inside/outside IHI Group

Organizational Role

Allow initiatives from these models to take root in the Group and contribute to growth from an all-IHI perspective

Diagram of Package Model

Strengthening of Common Group Functions toward

Growth (The Three Tsunagu) (1)

Intelligent Information Management Headquarters

Lead to the increased sophistication of more comprehensive IHI Group products and services by

strengthening control systems, sensing and ICT

Create and within current fiscal year commence real equipment applications of IHI

Group unique control equipment and software building tools

Quality improvements and cost reductions:

Increase reliability and at the same time shorten development times by library standardization

Long-term guarantee:

Stable supply over the long term by developing unique control equipment

Improvements in confidentiality:

Maintain software confidentiality by using unique software building tools

Common Control System Platform


ILIPS IHI group Lifecycle Partner System



Partially introduce this system in Group products in

use with customers, and commence constant

monitoring

In addition to rapidly responding to faults, contribute

to customer cost reductions through planned

maintenance

Commencing operations, including test operations,

at 10 businesses in 30 locations, plan to further

expand applicable products

Common Remote Maintenance Platform

Operating information

※

Preventive maintenance results

Component replacement

information

Error

notification

Alarms

※


Global Marketing Headquarters

Expansion of Regionally Based Businesses Link Global Customers/Markets with IHI Group

Efficient Business Operations in Regions Globally link IHI Group

Development/Adoption of Global Human Resources

Link global human resources with IHI Group

Build up customer and multilayered human networks in key regions (the Americas, China and Southeast Asia) and key countries

(Indonesia, Thailand, Vietnam and Malaysia)

In an integrated IHI Group manner develop region-based marketing/branding (hold forums in Brazil, Indonesia, London of the U.K., etc.)

Market surveys/marketing to search for new business opportunities that follow those in key countries

Realize effective business management and rapid

business development

Promote monitoring and strengthen governance with

regard to business management

Build global human resource management across

entire IHI Group Find highly capable human resources in the regions,

and draw up development plan

Development Centered on Three Regional Headquarters (the Americas, Asia-Pacific and China)

Americas Regional Headquarters IHI INC.

（New York)

China Regional Headquarters IHI（Shanghai）Management Co.,Ltd.

（Shanghai）

Asia-Pacific Regional Headquarters IHI ASIA PACIFIC PTE.LTD.

（Singapore）

Key Countries Indonesia/Thailand Vietnam/Malaysia

Local Subsidiaries

Representatives’ Offices

Key Regions The Americas/China Southeast Asia




Progress of Large-Scale Overseas Projects (1)

15

Dominion Cove Point LNG Expansion project

IHI E&C International Corporation, a wholly owned subsidiary of IHI Corporation, and Kiewit Energy Company, have entered into an engineering, procurement and construction contract to develop the Cove Point liquefied natural gas

facility located on the Chesapeake Bay in Lusby, Maryland. The IHI/Kiewit joint venture will design, construct, commission and start up the estimated 5.25 million tonnes per annum liquefaction facility.

Key milestones April 2013: Contract award, start of

engineering, procurement of key long-lead equipment

August 2013: Commence full procurement September 2013: DOE authorization to export to

non-Free Trade Countries Mid-2014: FERC approval expected Autumn 2017: Substantial Completion and

commencement of operations

Current status • IHI/Kiewit have assembled a global engineering

team located in the USA, Tokyo, Philippines and India, led from IHI’s Houston office

• Key equipment has begun manufacture in the US and Europe

• Planning of construction is under way in anticipation of mobilization to site in mid 2014

Concrete caissons for the main tower foundation section were provisionally completed in September 2013, and towing these from primary manufacturing site (a makeshift dry dock) to secondary manufacturing site (makeshift wet dock) was carried out. Under the current plan, the building of the caissons at the makeshift wet dock will be completed in March 2014, and sunk and installed under the sea at the north-south main tower location.


Izmit Bay Crossing Bridge

(image of completed bridge) Towing of provisionally

completed caissons from

primary manufacturing site

Project Overview • Type of bridge: Road suspension bridge • Span: Approx. 3,000m • Construction site: Izmit Bay, Turkey • Total cost of contract: Approx. USD 1.1 billion (consortium of IHI

Infrastructure Systems Co., Ltd. and Itochu Corporation) • Areas of responsibility: Construction covering a full set of design,

production and erection of superstructure and substructure of suspension bridge on a full turnkey basis

Principal Processes Sept. 2011: Contract signed, start of

detailed design Jan. 2013: Construction commenced Dec. 2014: Main tower completion Feb. 2016: Contracted delivery

Izmit Bay Crossing Bridge (Turkey)

Progress of Large-Scale Overseas Projects (2)

Structure which Supports Large-Scale Overseas

Projects

17 Copyright © 2013 IHI Corporation All Rights Reserved.

Achieve

operating

profit in all

segments

over four

consecutive

years

Strengthen

corporate-led

risk

management Introduction of RiskMetrix

Quantitative understanding of the

risks in large-scale onshore projects

Project Management System Upgrade

Pre-order acceptance examination of large-scale construction

contracts + post-order acceptance monitoring

Establishment of Investment Committee

Enhanced large-scale investment

check/monitoring functions

Expansion, Operation and Evolution of Foundation toward Facing

Further Large-Scale Overseas Project Challenges

“Group Management

Policies 2007”

(2007-2009)

Develop Foundation for Growth

Establish Growth Trajectory

“Group Management

Policies 2010”

(2010-2012)

Realize Growth

“Group Management

Policies 2013”

(2013-2015)

Equipped with the first hybrid propulsion system in Japan, an environment-friendly tugboat is in service.

First shipments of medium-speed gas engine with high-performance impact spark ignition whose environmental impact

was reduced were made.

Gaining More Orders by Introducing New Models


Resources, Energy and Environment

18

An IHI E&C International Corporation (IHI E&C) and Kiewit Energy Company joint venture won an EPC contract from

Dominion for the latter’s Cove Point natural gas liquefaction facility.

IHI E&C won an order from Dakota Gasification Company (Texas, the U.S.), a wholly owned subsidiary of Basin

Electric Power Cooperative of Bismarck (North Dakota, the U.S.), to act as project management consultant for the

construction of a shale-gas-based urea plant planned at its facility near Beulah, North Dakota.

Making Proactive Efforts toward Natural Gas-Related Businesses

High-performance, low environmental

impact medium-speed gas engine

0.0

10.0

20.0

30.0

40.0

50.0

0.050.0

100.0150.0200.0250.0300.0350.0400.0450.0500.0

FY2012 (Actual)

￥82.9/US$

FY2013 (Outlook)

￥95/US$

FY2015 (Target)

￥95/US$

5.0%

4.0%

5.6%

IHI acquired the U.S. company Nitrocision LLC, which possesses technologies that utilize ultrahigh-pressure liquid

nitrogen in the decontamination and demolition of nuclear power generation facilities.

Contributing to Safe Nuclear Power Generation Facility Decontamination/Decommissioning Work

(Billions of yen)

(Billions of yen)

Net sales

(left axis)

Operating income

(right axis)

Operating

margin


Social Infrastructure and Offshore Facilities

19

Having completed construction of the main towers of the Naht Tan Bridge in Vietnam, whose construction

started in October 2009, IHI commenced steel girder installation work. Plan is for all to have been completed

at the end of 2014.

Invested in Brazil’s Estaleiro Atlântico Sul S.A. in conjunction with JGC Corporation and Japan Marine United

Corporation. As a result, is proactively engaging in business in the marine resource development facilities

and structures fields.

Smooth Execution of and Strengthened Approaches to Overseas Projects

Naht Tan Bridge main towers

0.0

5.0

10.0

15.0

20.0

25.0

0.0

50.0

100.0

150.0

200.0

250.0

FY2012 (Actual)

￥82.9/US$

FY2013 (Outlook)

￥95/US$

FY2015 (Target)

￥95/US$

1.3%

2.9%

7.6%

Delivery of hybrid caissons for harbor mouth area of Kamaishi, Iwate Prefecture

First orders for tsunami lifeboat received following prototype approval granted by the Ministry of Land,

Infrastructure, Transport and Tourism’s Shikoku Transport & Tourism Bureau

Responses to Post-Earthquake Reconstruction and Natural Disaster Support Business

Tsunami lifeboat (prototype)

(Billions of yen)

(Billions of yen)

Net sales

(left axis)

Operating income

(right axis)

Operating

margin

Following establishment of after-sales service bases for heat treatment equipment, IHI set up manufacturing base within its

local subsidiary in Thailand.

Commenced operation at the base for consignment heat treatment business in Vietnam.

Overseas Development of Heat/Surface Treatment

IHI Compressor and Machinery Co., Ltd. established a parts supply and technical center to enhance its after-sales service

business. The company implemented inventory management of parts for general-purpose compressors and conducted

maintenance training for technical service personnel using real machines.

IHI launched highly efficient, grid connectable, package-type, small binary power generation equipment with a maximum

sending-end power of 20kW.

Compressor Business Progress


Industrial Systems and General-Purpose Machinery

20

Exterior view of small binary

power generation equipment 0.05.010.015.020.025.030.035.040.045.0

0.050.0

100.0150.0200.0250.0300.0350.0400.0450.0

FY2012 (Actual)

￥82.9/US$

FY2013 (Outlook)

￥95/US$

FY2015 (Target)

￥95/US$

3.6% 3.5%

5.5%

Established joint venture covering vehicular turbochargers with Hyundai WIA Corporation, a major automobile parts

manufacturer and a major subsidiary of Hyundai-Kia Motor Group in South Korea.

Responding to forecasts of increased sales in Europe and China, expanded and upgraded facilities.

Enhancing Responses to Increased Overseas Demand for Vehicular Turbochargers

Exterior view of small

binary power generation

equipment turbine

generator

(Billions of yen)

(Billions of yen) Net sales

(left axis)

Operating income

(right axis)

Operating

margin

IHI Aerospace Co., Ltd. was responsible for development of airframe systems of Epsilon rocket test vehicle

successfully launched by Japan Aerospace Exploration Agency (JAXA).

The U.S. CygnusTM space station supply spacecraft successfully docked with International Space Station

(ISS). CygnusTM is fitted with a spacecraft/satellite propulsion system engine developed and manufactured by

IHI Aerospace.

Expansion of Space Utilization Field


Aero Engine, Space and Defense

21

Airline passenger traffic is on growth trend and IHI in process of responding to increased production

associated with increased demand for existing types of aero engines.

Conducting development of new engines (PW1100G-JM, Passport20), aiming to steadily obtain type

certifications, promoting building up of mass production system.

Signed contracts with Japan Ministry of Defense on preparation for manufacturing 17 engine components for

F135 engine powering the F-35A next-generation mainstay fighter.

Aero Engine Demand Firm

Epsilon rocket ©JAXA

0.05.010.015.020.025.030.035.040.045.0

0.050.0

100.0150.0200.0250.0300.0350.0400.0450.0

FY2012 (Actual)

￥82.9/US$

FY2013 (Outlook)

￥95/US$

FY2015 (Target)

￥95/US$

4.6%

6.6% 6.5%

(Billions of yen)

(Billions of yen) Net sales

(left axis)

Operating income

(right axis)

Operating

margin

Forward-looking figures shown in this material with respect to IHI’s performance outlooks and other matters are based on management’s

assumptions and beliefs in light of the information currently available to it, and therefore contain risks and uncertainties. Consequently, you should

not place undue reliance on these performance outlooks in making judgments. IHI cautions you that actual results could differ materially from those

discussed in these performance outlooks due to a number of important factors. These important factors include political environments in areas in

which IHI operates, general economic conditions, and the yen exchange rate including its rate against the US dollar.

Documents

Results for the Six Months Ended September 30, …...Review of Six Months Ended September 30, 2013 (1) 4 Net Sales 0.0 10.0 20.0 30.0 40.0 50.0 60.0 (Billions of yen) 14.5 8.0 19.7